Daiwa has released a research report indicating an upgrade to LI NING's (02331) revenue forecasts for the current and next fiscal years by 4% to 7%, reflecting strong brand momentum. However, the timeline for margin recovery has been extended, leading to a 3% to 5% reduction in core earnings per share estimates. The target price has been raised from HK$24 to HK$27, based on a projected 2026 price-to-earnings ratio of 20 times, up from 18 times previously, which is close to its five-year average. The "Buy" rating has been reaffirmed. LI NING's performance in the second half of last year significantly exceeded market expectations, with its stock price recording the largest single-day gain in recent years. The report suggests this confirms LI NING's near-term revenue growth narrative, with the recovery still in its early stages and much of the upside potential yet to be realized. The group's net cash position represents approximately 40% of its market capitalization, reflecting market concerns over execution risks. However, based on current trends, the risk-reward profile is considered attractive, and LI NING remains the preferred stock among Chinese sportswear brands. The report notes that LI NING's sales growth in the second half was moderate. Management indicated that retail sales in the first quarter of this year achieved high single-digit growth year-over-year, and the full-year sales guidance has been upgraded to high single digits, marking the company's strongest revenue expansion since 2022. The net profit margin guidance remains unchanged at high single digits, which is viewed as reasonable given that the priority should be rebuilding brand appeal.